Government spending on tax breaks is set to hit a record $170 billion this year, largely as a result of an explosion in the value of concession for the family home.
Treasury's Tax Expenditures Statement required under the Charter of Budget Honesty and released quietly after the close of business on Thursday puts the value of the exemption from capital gains tax for owner occupiers at $74 billion this financial year, up from $66.5 billion last financial year, which was itself $5 billion more than Treasury had forecast.
Four years ago, before house prices shot up, it was worth $46.5 billion. Treasury says by 2020-21 it will be worth $91 billion.
The exemption releases owner occupiers from the obligation to pay capital gains tax on profits made from the sale of their primary residence. Those profits have soared in recent years as prices have climbed, especially in Sydney and Melbourne. Investors pay capital gain at half the income tax rate, a concession the Treasury costs at $10 billion, up from $4.4 billion four years ago.
The cost of tax expenditures is tabulated so that the government can compare the budgetary impact of direct spending in the form of grants with indirect spending in the form of tax breaks.
The government costs assistance to the aged at $64.3 billion and assistance to the unemployed and the sick at $10 billion.
The concession tax treatment of superannuation contributions is costed at $16.9 billion. The concessional treatment of super fund earnings is costed at $19.25 billion. The two figures can't be added together to get a total for super tax concessions, because if contributions were fully taxed the funds would earn less.
The exemption of so-called fresh foods from goods and services tax costs $7 billion per year. Among the items exempt because they are used to prepare food at home is sugar, although commercially prepared products containing sugar such as soft drinks are subject to the GST.
The GST exemption for education services including private school fees will cost $4.55 billion in 2017-18 and $5.65 billion in 2020-21. The exemption for medical services costs $4.1 billion.
The cost of the farm management deposit system, which gives tax advantages to qualifying farmers, is is expected to double from $245 million in 2016-17 to $560 million in 2017-18.
The figures come as the government attempts to find savings to fund personal income tax cuts in the May budget and reduce the deficit of $21.4 billion.
Tax Break Top 10
The 10 biggest tax expenditures identified by the Treasury
Revenue forgone per year
Capital gains tax exemption for family home: $77 billion
Tax relief for superannuation earnings: $19.25 billion
Tax relief for superannuation contributions: $16.9 billion
General capital gains tax discount: $10.27 billion
GST exemption for fresh food: $7.1 billion
GST exemption for education: $4.55 billion
GST exemption for health services: $4.1 billion
GST concession for for financial services: $3.4 billion
Tax relief for termination benefits: $2.4 billion
Concession for superannuation life insurance: $2.37 billion